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Innovation Gridlock

The first decade of the 21st Century has seen startling advances in biology. Scientists have cracked the genomes of humans and many plants, animals and microbes. They've uncovered new cellular processes affecting inheritance of diseases. Likewise, investment in biotech research and development has been steadily increasing. So what happened to all the lifesaving cures that were supposed to come our way as a result?

Big Pharma produces a blizzard of new products, but these are mainly marketing exercises that often involve little more than tweaks on existing drugs. New drugs that could lead to improvements in human health have not been as forthcoming. Drugs that should exist, and could exist, are not coming to market.

The problem is that now more than ever biomedical invention requires assembling scattered bits of intellectual property. Because of the patent system in the United States, that task has become exceedingly expensive and complex. The idea of granting drug patents is to spur discovery and cure disease, but a proliferation of patents is having the opposite effect. It is creating a type of gridlock that is stifling innovation.

This intellectual gridlock doesn't happen just in the drug industry. Today most innovation in high-technology fields—banking, nanotech, semiconductors, software, telecom—demand the assembly of innumerable patents or intellectual property. Next-generation wireless broadband requires many broadcast-spectrum licenses. Cutting-edge art and music depend on mashing up and remixing fragments of separately copyrighted culture. Even the current financial crisis is partly the product of intellectual gridlock. Mortgages have been pooled, sliced and securitized to the point that thousands of dispersed owners can block restructuring of the underlying debts. The story is the same across the wealth-creation frontier: lost opportunities, lost inventions, lost lives.

The problem is especially acute in the U.S. patent system, as it applies to biotech. Compared with Europe and Japan, the American system allows patents on a wider range of subject matter, for relatively less significant discoveries, and with lower standards for patent grants. The result: the U.S. Patent and Trademark Office issues hundreds of thousands of weak, vague patents and has a multiyear backlog of applications. If you are a U.S. innovator, there is no way even to figure out who owns rights relevant to your proposed new drug. Usually we think the sheer number of U.S. patents is a sign of superior innovative talent and competitive strength. Not so, when innovation requires assembly.

New drugs remain the starkest victim of this destructive patent gridlock. This problem started in 1980 when the U.S. Supreme Court began allowing patents on living organisms. That shift helped jump-start the biotech revolution, leading to a wave of scientific discovery, including about 40,000 DNA-related patents. The downside became visible in the 1990s as drug developers began confronting the new patent thicket.

Imagine a drug developer walking into an auditorium filled with dozens of owners of DNA patents needed for a particular medical breakthrough. Unless he can strike a deal with everyone in the room, there's no way forward. Peter Ringrose, former chief science officer at BristolMyers Squibb, told The New York Times that the company would not investigate "more than 50 proteins possibly involved in cancer" because patent holders "either would not allow it or were demanding unreasonable royalties."

A survey sponsored by the National Academy of Sciences found that scientists now routinely respond to gridlock by becoming patent pirates, just like students who illegally download music. Commercial drug developers, of course, cannot risk disregarding competitors' patents. Many of the world's leading drugmakers simply redirect investment toward less challenging areas and innovation quietly slips away. The dearth of new blockbuster drugs should prod Big Pharma off its longstanding position that the existing patent regime must be defended no matter what.